State Pension Age (Women)

Julie Elliott Excerpts

Wednesday 11th May 2011 Westminster Hall

[Julie Elliott (Sunderland Central) (Lab)]

It is a pleasure, Mr Weir, to speak under your chairmanship this morning. I warmly congratulate my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce) on securing this debate and on her excellent introduction. I am pleased that so many Members are here to participate; this is an important subject, and many will be affected.

I start by saying how many of my constituents in Sunderland Central have contacted me about this issue. Over the past couple of months, I have been overwhelmed by the number of people contacting me who are worried and anxious, and oppose the Government’s plans to speed up the equalisation of the state pension age. Many have written giving their own stories of what they are about to lose.

Average life expectancy in this country is increasing. That is a good thing, but it is why reforms to the current pension system are necessary. No one disagrees with that. We live in an ageing society, and the pension age needs to rise to ensure that people’s retirements remain financially secure and enjoyable. However, I cannot support the changes that the Government propose, as speeding up the timetable for equalising the state pension age in that manner is unfair to my constituents.

[Yasmin Qureshi (Bolton South East) (Lab)]

Does my hon. Friend agree that the golden principle running through our legal system is that legislation should not be made that results in offenders not knowing what sentence they are going to get? In a similar way, in civil law those who enter into a contract, such as in employment, should know exactly what the terms and conditions are. Retrospectively to change those terms and conditions is manifestly legally and morally wrong.

[Julie Elliott]

I totally agree with my hon. Friend. It is that feeling of injustice—almost that people have been conned; they thought that they were contributing to one thing, but were getting something else—that is so stark in these proposals.

I shall give a few examples to explain the problems that the proposed changes will bring to the lives of many women in my constituency—and, I am sure, across the country. The first is of a woman who has worked, planned and saved, but will still be caught out. She has done everything that people are being told to do. She has worked from the age of 16, with a couple of intermissions to have children, although in those days maternity provisions were not as good as they are now.

This woman has three small private pensions from her various places of work; in some ways, she is in a good position compared with many, although two of those pensions will be deferred until she is 60. A couple of years ago, her parents became ill. She did all the calculations; she could release the private pension from her current employment, and she had some savings, so she decided that she could manage with her deferred pensions being paid at 60 and her state pension not being paid until she was 63. She did all that, and left work a couple of years ago.

One could argue that my constituent has saved the state money by looking after her ailing parents. However, she now finds that her state pension will be delayed. She has done everything right—she has worked, saved and contributed—but is being penalised, and will somehow have to find the shortfall. She is incredibly worried about that. She has never been well paid, but has been cautious in her financial planning.

Another constituent who contacted me is set to lose more than £7,500 of the state pension, something that she has worked hard for over many years. She is now required to work a further 74 weeks. She understandably feels let down by the Government. In her letter, she said that she has worked extremely hard all her life, yet her retirement age seems consistently to move further away. Frankly, the changes to her pension have left her feeling robbed. She is not in good health, and wonders whether she will be fit enough to work those extra years. She may have to go on to benefit, something that she has never wanted.

The third of my constituents to write to me says that she had planned to work until she was 60. She began saving, and started contributing towards her pension when she was 18—38 years ago. She has worked hard and contributed to society; she paid her taxes and her national insurance contributions. At the age of 56, she was looking forward to a relaxed and financially secure retirement. The Government’s plans mean that she will now have to work until she is 66, six years longer than she expected. Her health is failing due to the stress of her job, and she is not financially prepared for the change. She wonders how she is meant to prepare for it at such short notice, and why the Government have let her down in this way. I am sure that she also wonders why the Government are going back on their promise in the coalition agreement.

A common theme runs through the letters that I have received from constituents. They do not disagree about the state pension age rising; they recognise that increasing life expectancy makes that logical. However, they say that moving the goalposts at such short notice is creating serious financial harm and causing real worries. As a result, some are considering working beyond their state pension age. However, that should be a choice; it should not be forced on them. Retirement, and especially the age at which people decide to retire, should be about choice, but choice has been stripped from those affected by these changes.

In my constituency of Sunderland Central, 1,100 women aged between 56 and 57 are among the 33,000 women whose state pension will be delayed by two years. I wrote to the Minister, asking about his plans for the state pension age. In reply, he said:

“While overall there are some aspects of the change that will affect women more strongly than men, we consider the effect is not disproportionate”.

I disagree with him. No man will have to wait longer than a year, but 500,000 women will. If that is not disproportionate, what is?

When it comes to the state pension, women are already at a disadvantage. The median pension saving of a 56-year-old woman is almost six times lower than for a man of the same age. Women will have decided to have children and work part-time to raise families. That is a valid decision and one for which they should not be punished—indeed, they should be praised. However, under these proposals such women do not have enough time to adjust their financial plans for retirement. Many have already decreased their hours in preparation for retirement, and some will have done so because of ill health.

Retirement is an opportunity for those who have contributed all that they can to society to rest with peace of mind, knowing that their contributions will be recognised and that they will be adequately provided for. However, I worry about the long-term costs for these women. I suspect that there will significant hardship, with anxiety and stress about financial matters. I also worry about the ill health that results from working to an older age.

The Turner Commission recommended 15 years of preparation before such changes are implemented. I would be interested to know why the Minister disregarded that and opted for far fewer years. Current plans will result in very different outcomes for women of similar ages. I know that the line has to be drawn somewhere, but deciding a person’s pension eligibility by their birth date suggests that the entire reform is being introduced too swiftly. The Government should stick to the original timetable, with equalisation at 65 in 2020, and not increase the state pension age to 66 until after that.

Once again, I congratulate my hon. Friend the Member for Erith and Thamesmead on securing such an important debate. I look forward to the Minister’s response.

--- Later in debate ---

[Steve Webb]

The things that Turner recommended are not consistent with each other. We cannot, for example, have a consistent percentage of income during life in retirement and give 15 years’ notice at the same time, because longevity is increasing much faster than that. Something somewhere has to give.

One point that has been missing during this debate—the only time that it was mentioned was when an hon. Member quoted me from last week’s debate—is that if we delay till 2020, as the hon. Member for Leeds West (Rachel Reeves) proposed, we will have to find £10 billion. My hon. Friend the Member for Argyll and Bute (Mr Reid) raised an important point, and he is analytically correct: that does not help us in the comprehensive spending review period or help the long-term structural deficit, because the age would have been 66 anyway. However, it does do one thing: it takes £30 billion—or rather, £10 billion; the whole change amounts to £30 billion, but the difference between the two of us is £10 billion—off the national debt. As he knows, servicing the national debt is one of the most crippling things that this Government must do. That is why such difficult decisions must be made.

Our changes will take £30 billion off the national debt. I do not know what the interest rate on the national debt is, but let us say 5% for the sake of round numbers. That is just to make the numbers add up; I do not suppose for a minute that it is 5%. That is £1.5 billion extra every year to spend on services or whatever rather than on the national debt. I think that that would be the hon. Lady’s preferred solution.

[Julie Elliott]

In those calculations, has the Minister taken into account the number of women who will end up on benefits to cover the shortfall during the time when they had planned for a pension, as in the examples that I quoted?

[Steve Webb]

Yes, we have. All our costings make assumptions about the proportion of people who would find themselves on benefits. Hon. Members have asked what people will live on between 64 and 66. Clearly, there will be a range of responses. Some people will go on working longer. Seven out of 10 people in the cohort that we are discussing—those born in 1953 and 1954—are in work at the moment.

Several people raised the important issue of different socio-economic groups. Across the socio-economic scale, life expectancies are rising. We cannot use the fact that there are differences between different groups—as there have been probably for ever, and certainly for the past century—as an argument for doing nothing. That argument would apply under the proposals of the hon. Member for Leeds West. If we raised the age a year to 66 in 2020, it would have exactly the same impact on the different socio-economic groups. Her proposal would have exactly the same impact on the numbers of carers and volunteers aged 64 to 66. Many of the points made by hon. Members in this debate about the impact on that age group would apply exactly, only four years later, or six years later under her proposals. We need to make a distinction between things that will be inevitable as the state pension age rises and the consequences of doing it more rapidly, which has been the focus of this debate.

Members have asked about caring responsibilities. We might not have expected this, but it is striking that the number of women within this age cohort who say that they have caring responsibilities is falling, partly because of social and demographic change. In 1993, of the women who are now in the 55 to 59-year-old age cohort, 15% had caring responsibilities, but, in 2010, the figure halved to 7.1%. Again, that suggests significant changes and that people are living longer and working longer. I suspect that caring responsibilities are being taken on, but that that is happening later in life than it would have previously.